European premium base oil spot prices could face downwards pressure in 2026 from increased competition as global supply rises and import duties are removed.
Average Group II European spot prices have fallen steadily since the end of April, by 14pc to €932.50/t assessed on 12 December. This is mostly owing to muted demand but exacerbated by a weakening US dollar against the euro as volumes are bought on a dollar basis and sold in euros in Europe. A persistent supply overhang from the US saw exporters increasingly target European buyers.
This trend looks to continue into 2026 as the EU looks to remove a 3.7pc import duty on US Group II shipments. This is part of EU-US tariff negotiations, with EU states showing broad support for the duty removal of a large package of US goods, including base oils. A European parliament vote on this is slated to take place, probably in late January.
Europe is a net importer of Group II base oils, with ExxonMobil's 1mn t/yr refinery in Rotterdam the only northwest European production site. Base oil and finished lubricants exports to the EU and UK made up on average 14pc of US total exports since 2020, EIA data show.
Freight rates will again play a part in deciding how much product arrives in Europe in 2026. Rates from the US to Europe have been falling since the summer. Argus assessed 40,000t specialised chemical tankers on the route at an average $38.08/t in October, down by 15pc from August, and 5,000t part-cargo assessed rates fell by 10pc in the same time to average $69.50/t.
Should rates continue to fall and the EU remove duties, US shipments to Europe are likely to increase. European prices are the highest globally. Supplies of N600 are at a $463.50/t premium to US equivalents and at a $404.50/t premium to Asia bulk, as assessed on 12 December.
Global Group II production is likely to rise in 2026. Polish refiner Orlen will expand its Gdansk facility with an additional 450,000 t/yr, Saudi Arabia's Luberef will expand its Yanbu refinery by 100,000 t/yr, and ExxonMobil's Jurong, Singapore, plant expansion is slated to come online fully by year-end 2025. All these will probably target the highest price region, Europe, for their additional capacity.
Spot prices for Group I are also ending 2025 on a downwards trend, as weak demand offsets structurally tighter supply. But this could reverse in early 2026.
Orlen will undergo a refinery-wide maintenance for 60 days in the first quarter, affecting output at its 250,000 t/yr Group I unit at Gdansk. EU sanctions on refined products using Russian crude has seen diesel prices rise. The price spread of the premiums Group I SN 150 and diesel carry over the feedstock vacuum gasoil (VGO) narrowed to average $95/t in November, from $233/t in August. Should this continue refiners are likely to prioritise diesel output over base oils.
Several European refiners are already pivoting away from base oil production, curbing supply availability and adding upward price pressure. But minimal scheduled maintenances in 2026is likely to enable supply to recover, and a weak economic outlook should see demand remaining steady.
